Small businesses that fear competing giant neighbors may need to think again. According to research by a joint team of university scientists, having a large competitor nearby may actually boost the sales of small businesses, but this depends on whether a small business can successfully “stick it to the man” in “framing the game.”
“When the owner of Los Angeles’s Coffee Bean & Tea Leaf could not stop Starbucks from moving in next door, he at first admitted defeat,” the team stated. “However, soon after, he was surprised to see his sales shoot up, so much so that he began to proactively locate new stores next to Starbucks.”
The research team, composed of Neeru Paharia of Georgetown University and Jill Avery and Anat Keinan of Harvard University, set out to test a theory that small businesses could benefit from big neighbors.
They examined shopping habits of two groups of participants. One group was told that a small bookstores only competitors were other small bookstores. Another group was told that the small bookstore was in competition with a nearby chain that threatened the future of the small bookstore.
The second group was more likely to buy at the small bookstore.
The team further explored the idea with a second study.
They gave participants a scenario: “Imagine you are in the mood for a cup of coffee. You can either go to Starbucks or an independent coffee shop called Joe’s Java.”
Again, there were two groups involved. The first was told that Joe’s Java and the chain were the same distance away, although in different directions. The second group learned that Joe’s and Starbucks were neighbors.
The second group–believing the two shops were neighbors–was the one that was more likely to patronize Joe’s Java.
The team believes that the results indicate an interest people may have in “sticking it to the man.”
This interest, the researchers argue, has something to do with the “framing-the-game effect.” Consumers, the researchers believe, want to be felt and heard in the marketplace, and do so through their purchase choices. Thus, they may feel motivated to exert their influence upon stores they wish to allow to succeed or fail.
The report, “Positioning Brands against Large Competitors to Increase Sales,” was authored by Neeru Paharia, Jill Avery, and Anat Keinan, and will be published in the upcoming in Journal of Marketing Research.
By Cheryl Bretton
Small businesses aren't hurt by giant competitors, sales are boosted if they can "stick it to the man"
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